What’s Next For US Renewable Energy Subsidies?

US renewable energy subsidies are scheduled to expire on December 31, 2016. What will replace them? The answer may well depend on the next general election results in November of next year. Politicians are already honing their campaign rhetoric and many conservatives are openly hostile to subsidies for renewable energy technology.

Policies & Politics

There is no doubt that government policies have an enormous effect on the renewable energy industry. Federal tax credits have been the primary engine for change when it comes to the huge increase in available wind power assets that have come online in the past decade. The rooftop solar industry as it is today would not exist without federal incentives. Unseen behind the ramp-up of renewable energy sources is the billions in research that has been funded by the federal government. Nothing could possible slow down this juggernaut, could it?

Actually, yes. A shift in the political winds could bring it all to a halt virtually overnight. Take away all those incentives and the impetus to build massive new renewable energy resources will primarily evaporate like morning mists. That’s exactly what is happening in major countries around the world.

Australia & Britain Pull Back On Solar

In Australia, the Abbott government has issued instructions to the Clean Energy Finance Corporation (CEFC) prohibiting it from investing in wind farms or small-scale solar projects. Opposition leaders and solar energy supporters say the government directive will cripple the rooftop solar industry and diminish Australia’s chances of transitioning to a clean energy economy.

“I don’t agree with the prime minister that if you just don’t have any government support for the future of renewable energy, that the renewable energy will just miraculously grow and increase in Australia,” opposition leader Bill Shorten told the Australian Broadcasting Corporation. He said that striking wind farms and rooftop solar from the CEFC will mean that “the only thing the CEFC can invest in is flying saucers.”

In Britain this week, the government followed Australia’s lead by ordering a drastic reduction in subsidies paid for offshore wind farms and rooftop solar installations. The feed-in tariff, which now pays British families 12.4 pence per kilowatt-hour for electricity fed back into the grid, will be slashed as of January 1 to just 1.6 pence, an 87% reduction, according to The Guardian.

Journalist Peter Dominiczak, writing in the The Daily Telegraph on 28 August, said, “Britain’s solar boom is over after ministers announced they would offer virtually no subsidies for people to install panels on their homes. In a surprise move, ministers on Thursday said that they plan to slash the amount of money given to families who put solar panels on their homes. Under the new proposals, the amount paid to homeowners under the ‘feed-in tariff’ from next year will fall by nearly 90 per cent. Critics say the scheme, which was heavily pushed by energy firms, enables wealthy families to rake in subsidies paid for by many who are already struggling with their energy bills.”

British Policy Shifts

So, let’s get this straight, shall we? The British government, at the behest of established energy firms, is helping ordinary Brits meet their energy bills by paying them far less for the electricity they generate themselves on their own rooftops? Yeah, that makes sense.

The changes were ordered by the British Department of Energy and Climate Change (DECC) under pressure from the Cameron government. A report in the Daily Mail in December of 2013 revealed that Cameron had ordered ministers to ditch the “green crap” blamed for driving up energy bills and making business uncompetitive. The Prime Minister, who once pledged to lead the “greenest government ever,” had publicly promised to “roll back” green taxes, which add more than $200 a year to average fuel bills. But a senior Tory source said Mr Cameron’s message in private is far blunter. The source said: “He’s telling everyone, ‘We’ve got to get rid of all this green crap.’ He’s absolutely focused on it.”

Reaction To New Policies In The UK

Reaction has been swift and furious. Colin Calder, chief executive of a solar supply firm PassivSystems, said, “It is extremely disappointing to see the government once more targeting the rooftop solar market with tariff changes that are so extreme they will destroy an entire industry overnight, putting thousands of jobs and many businesses at risk.”

Juliet Davenport, chief executive of leading green power supplier Good Energy, offered this opinion, “The feed-in tariff has transformed the way the UK generates its power over the last three years, with over 21% of the UK’s power coming from renewables in the early part of 2015, and over 700,000 homes generating their own power.”

“These absurd solar cuts will send UK energy policy massively in the wrong direction and prevent almost a million homes, schools and hospitals from plugging in to clean, renewable energy,” said Alasdair Cameron at Friends of the Earth.

The Road To Paris

All of this political upheaval makes it interesting to ponder what will happen at the global environmental conference in Paris this year. On the surface, it appears that the representatives from several nations — particularly Australia and Britain — will serve up a selection of pious mouthings while cutting the heart out of any effective policies designed to actually address climate change when the get home.

How can that be? Simple. Follow the money, a wise person once said. Australia generates billions by selling its almost limitless coal reserves to other countries, particularly China. It will be happy to discuss meaningful climate change policies once all that lovely coal is out of the ground and sold. Britain has a large, entrenched energy industry that has trillions invested in generating plants and distrubution infrastructure. Industry executives are terrified that they will not be able to recoup their investment.

President Obama Steps Up

President Obama last week called out wealthy interests like the Koch Brothers, whose enormous fortunes are inextricably tied to business as usual in various fossil fuel industries — especially coal. He said “massive lobbing efforts backed by the fossil fuel (industry), conservative think tanks or the Koch Brothers to roll back renewable energy standards or prevent new clean energy businesses from succeeding (are) a problem. That’s not the American way.”

He also praised progressive utilities that are embracing renewable energy, as opposed to utilities like NV Energy, which is threatening to put a hard cap on the number of rooftop solar systems it will integrate. He said, today “(consumers) can tell (their) utility company that they want renewable energy and have solar on the roof by the weekend. That’s power. That’s the future. It’s an American energy revolution. Good utilities recognize this and are adapting business models to seize the opportunities of this emerging energy reality.”

Obama went on to say the nation as a whole was in the middle of a large-scale transition towards new forms of energy production. “Clean power from the sun is cheaper than conventional power from the utility. It is impossible to overstate what this means. For decades we’ve been told that it’s not possible to switch to renewable energy. Today that is no longer true,” reports the Las Vegas Sun.

What’s Next For The US?

A study by the University of California Berkeley released in July and entitled The Distributional Effects of US Clean Energy Tax Credits has harsh words for the current system of energy credits in the US. In essence, it says those credits have mostly enriched the wealthy at the expense of middle class and poor citizens.

It is especially critical of the federal tax credit for electric cars. Why? Because in order to benefit from the $7,500 tax credit, you must first owe at least $7,500 in federal taxes. The vast majority of Americans owe far less than that, and so the credit for them is limited to what they actually owe. Severin Borenstien and Lucas Davis, authors of the report say, “The most extreme [example] is the program aimed at electric vehicles, where the top income quintile received about 90 per cent of all credits.”

When it comes to rooftop solar, the study points out that home solar systems, by definition, only benefit people with homes. That means most Americans cannot take advantage of the renewable energy credit. Once again, most of the benefit goes to people with above-average incomes.

The Fight Over Government Handouts

There is no doubt such reports will figure prominently in the debate about whether to extend the present system of clean energy tax credits or replace it with something else. Many conservatives bemoan the amount of help given to “green” industries while choosing to completely ignore the trillions in fossil fuel subsidies that are doled out annually by government around the world. The International Monetary Fund said earlier this year those subsidies total more then $5 trillion a year.

So, in the words of an old Aretha Franklin song, “Who’s zoomin’ who?” Should clean energy industries stand on their own two feet without government help, as Britain and Australia suggest? Or are governments merely falling meekly in line to please their wealthiest and most powerful patrons — people who get spittle on their chin sputtering about all the money going to clean energy projects when they themselves are part of that $5 trillion dollar a year gravy train?

One wonders just how short sighted some people can be. It’s all well and good to try and protect your own fiefdom, but in order to do business, one must first have customers to sell to. How do the Koch Brothers and their ilk expect their business empires to thrive when high tide reaches new and interesting places — like Peoria?